Faced with the prospect of increased fuel consumption as people attempt to stay warm this winter, OPEC agreed to raise production by 500,000 barrels a day today. The commodity markets reacted with a great big shrug – the price of crude for October delivery was up $.74 to $78.23 a barrel at close today.
That’s a new record, but amongst all the clamor over the sub-prime meltdown, including last week’s dismal numbers from the Labor Department, no one seems to be paying that fact much mind. Our elected officials haven’t said anything on the matter, and the media’s been pretty quiet too. But not the Huffington Post. Raymond J. Leary has a lot to say about the energy situation, and it boils down to: ‘OPEC has us over a barrel.’
It is… troublesome that not a single official voice has been raised pointing to the price of energy as a key component for the deteriorating economic situation.
Certainly the sub prime debacle is playing a key anchor in the economic events of the moment, but certainly this nation as the world’s largest oil consumer experiencing a 50% increase, since the beginning of the year, in the price of a commodity crucial to its economy is a staggering economic blow. It represents an additional outlay of more than $500 million a day.
Leary has some choice words for President Bush “who has seen oil prices climb some 300 percent during his Presidency with nary a chastisement to either the oil industry or their friendly comrades in arms, the members of OPEC.” But he saves his real fire for OPEC whose output in August was 30.37 million bpd — that’s slightly lower than output in 1979 — a statistic which calls into question how serious the cartel is about maintaining ’supply and demand equilibrium.’ Leary believes:
OPEC does not meet to determine stock levels as its first order of business, but rather to determine the level of tolerance that will be accepted by its customer base (are you listening Mr. Bush?) in order to maximize price.
We here at the BNET Intercom also couldn’t help but notice that when Forbes recently announced its list of the fastest growing companies in America, a full 37 of them were oil companies.
Leary has a point that our government could strike a tougher tone with OPEC, and certainly our leaders should point out that oil companies are making obscene profits at the expense of the economy as a whole (not to mention those who desire that luxury commodity, heat), but the troubling reality is that, when it comes to oil, we have all the negotiating power an addict has with the only dealer in town. Add to that reality the open question of exactly how much oil companies can raise supply and at what coat, and it becomes crystal clear that America is desperately in need of new solutions to our energy problems. Like all tough problems, this is both a challenge and an opportunity for the business community. It should be a call to action for our politicians.
